Changing the way ultrasound probes are disinfected

Investor Briefing: April 2012 Dr Ron Weinberger, Managing Director McGregor Grant, Chief Financial Officer

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Disclaimer

This presentation is intended to provide a general outline only and is not intended to be a definitive statement on the subject matter. The information in this presentation, whether written or verbal, has been prepared without taking into account the commercial, financial or other needs of any individual or organisation. Certain information may relate to protected intellectual property rights owned by Nanosonics (the “Company”). While Nanosonics has taken due care in compiling the information, neither the Company nor its officers or advisors or any other person warrants the accuracy, reliability, completeness or timeliness of the information or guarantees the commercial or investment performance of the Company. The information does not constitute advice of any kind and should not be relied on as such. Investors must make their own independent assessment of the Company and undertake such additional enquiries as they deem necessary or appropriate for their own investment purposes. Any and all use of the information is at your own risk.

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Healthcare Acquired Infections

Current situation: • Bacterial spores e.g. C.Difficile; traditionally not considered

threat are resistant to standard disinfection methods • C.Difficile infections considered “epidemic” by the European

Centres for Disease Control and Prevention • Major cross infection scandals (e.g. VA hospital system) driving

automated reprocessing and Federal legislation changes in USA.

High costs associated with HAIs

Australia • ~180, 000 infections annually = 2 million bed days required

USA • 46.5 million surgical procedures annually • Fourth highest cause of death in USA • US$36-98 billion cost to healthcare system

Regulatory & legal changes

• HMOs refusing to reimburse costs linked to HAIs • Obama healthcare reform pushed HAI costs back to clinical

site of origin • Global trend to public disclosure of HAI

The Challenge: Healthcare Acquired Infections are Increasing, Changing & Costly

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Ultrasound probes Diagnostic imaging technique • Used to visualize tendons, muscles, joints, & internal organs • 20+% of procedures intracavity, e.g. obstetric, gynaecological, IVF

Current disinfection methods

Disinfection processes not changed for 20+ years • Based on toxic aldehyde and OPA chemicals • Complicated and long process to disinfect probes • Process compliance a major issue

Chemical toxicity Staff and patient safety • IVF and OH&S issues due to toxicity of current chemicals • Many US states require separate disposal of chemicals • Much of EU has banned aldehydes • Major process to clean spilt chemicals

Point of care disinfection

Standards of disinfection changing • FDA mandates high level disinfection for intracavity probes • CDC recommends use of hydrogen peroxide

The opportunity Create a safer, quicker, quality assured way of disinfecting ultrasound intracavity probes

The Challenge: Rapid increase in the use of intracavity probes

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Current market: > 500,000 ultrasound machines installed globally

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2.88

5.18

Ultrasound machine market forecast to grow significantly

30%

36%

34%

Distribution of ultrasound machines globally

North America

Europe

Asia, Pacific

Data source: GlobalData 2009 global market forecast

2009 2015

$US Billion

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Compatible with all major Ultrasound probes > 600 million procedures per annum*

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Siemens 17%

Toshiba 14%

Philips 21% Aloka, Hitachi,

Medison et. 22%

GE Healthcare 25%

Other Procedures

60 – 70%

Obstetrics & Gynaecology HLD is ~20%

Other HLD Mandated procedures 10 - 20%

Market share of leading ultrasound manufacturers

Nanosonics’ markets

Nanosonics initial target markets: • Obstetrics and gynaecology • Other HLD mandated high-level disinfection

procedures (e.g. prostate, surgical, anaesthesiology)

Other procedures = future markets • Require changes in clinical and regulatory practices

(e.g. surface probes)

Data source: Philips Ultrasound and Monitoring

* ~5 cycles per day

Current focus

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Extensive testing with all leading ultrasound intracavity probes; manufacturer endorsed

Closed system eliminates OH&S

issues with handling any chemicals

Proprietary hydrogen peroxide nebuliser

breaks down to water and oxygen

Inbuilt checking system confirms probe meets

required standards

7 minutes to disinfect each

probe, reduces number of probes

required

Lightweight unit allows point of care

disinfection; eliminates cross

contamination in disinfection

Trophon EPR first fully automated system for disinfection of ultrasound probes

Lower cost to disinfect; less than 2ml of

NanoNebulant required to disinfect probe

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Multiple revenue streams: balance product sales with annual revenues

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Trophon EPR: 240 and 110 volt models 41% of revenues

• Margins in line with similar medical devices

• Manufactured locally by Nanosonics

• Multi-lingual option

Consumables: NanoNebulant and Chemical Indicator Test 52% of revenues

• High margin products • R&D in house • Production outsourced

Accessories: Mobile Carts, Wall Mounts 2 % of revenues

• High margins • Low capital investment

Service Contracts 4% of revenues

• Annual fees • Major service required after 5,000

disinfection cycles

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Strategic approach to market development

Current Markets Phase 3 Phase 2

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Regulatory approvals obtained; large ultrasound markets; distributors appointed

Regulatory approvals still needed; Languages to be added distributors not yet appointed

Regulatory approvals still needed; Languages to be added distributors not yet appointed

Australia, New Zealand Argentina China

USA, Canada Brazil Japan

Europe: priority focus France, Germany, England

India

Sub-Saharan Africa

Turkey Korea

Israel/Middle East Singapore, Taiwan

Hong Kong Mexico

Thailand, Vietnam

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GE driving exclusive distribution in North America

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No competitors in point of care automated HLD Very high barriers to entry

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Sector competition • Non-existent • Current chemicals difficult to defend; regulators require change • No other high-level, low temperature, point of care disinfection

system on market

Supplier power • Nanosonics in control; long term contracts • New niche creates new revenue category for suppliers

Customer and distributor power

• Pricing pressures not a threat, Trophon only available option besides continuing with chemicals

• Demand driven by economics, productivity, patient, staff safety • Multiple distributors competing to distribute Trophon

New entrants and substitute products

• Regulatory approvals take 3-5 years • Very difficult to substitute high-level disinfection processes • Capital purchase of Trophon locks out other entrants

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Owning the disinfection process

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Objective: Own the ultrasound probe reprocessing market

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Patient

Clean

Wipe

Disinfect

Record

Store

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Software and Printer

• Patient audit trail and traceability of probes and usage • Software for patient specific records; Price approx $500 • Trophon EPR specific printer to print immediate

patient record; Price approx $800

Pre-disinfection wipes • Cleaning and drying of probe prior to disinfection essential • Moving disinfection of probes to point-of-care creates need

for other probe cleaning options • Sale price not yet determined

Focus moves to broadening revenue base

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Platform creates new opportunities

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2nd generation Trophon • Build Trophon into ultrasound machines

Other types of ultrasound probes

• Transesophageal Echocardiography probes • Ear nose and throat probes • Surface probes: current major use of ultrasound probes

NanoNebulant other uses

• Expand use of underlying intellectual property and technology

• e.g. Disinfection of food, healthcare environments

Intellectual property • Valuable portfolio of sterilant and prionicidal methodologies, & chemistries

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Global market • Healthcare Acquired Infections major health issue • New disinfection standards for intra-cavity ultrasound probes • Patient audit and traceability increasingly important • Regulation, compliance standards driving change and growth

High barriers to entry • Strong family of patents • Major advantage over new entrants • Solid base of regulatory approvals • Lock out competitors by purchase of Trophon EPR

Strong management team

• Building healthcare products team with deep international experience in manufacturing, global roll-outs, service

Broadening revenue base

• Consumables provide dependable annual income • Innovations – software, wipes etc add additional revenues

Growth • New markets: growing global footprint with staged roll-out • Regulation of surface probes and disinfection requirements • Low temperature sterilization market growing

Nanosonics investment case: building strong global company

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FY12 Half Year Results Continuing steady sales growth

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Solid base for future growth

Sales • Revenues increased $3.71m to $5.08m • Quarter on quarter growth • Australia /New Zealand installed base >500 units

Broadening revenue streams

• Service contracts tested in New Zealand • Roll-out to other countries • Consumables, accessories starting to contribute to result

Production capacity • Currently 6,000 units per annum, with scale-up plans continuing • Output per week more than doubled

Operating costs • Investment in manufacturing operations • Increase Technical and Business development teams

Net loss • Reduced 33% to $3.05m • Management focus on costs and business processes

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Distributors • Quality key to market penetration and sales growth • USA: GE Healthcare deep client base via ultrasound probe sales • Europe: initial focus on top 6 value market

Manufacturing • Focus on capacity as well as manufacturing capabilities • New facilities improved production rates and reduced costs • Better supplier contracts improving product margins

Outsourcing • NanoNebulant production outsourced improves NAN margins • Better supply chain management • Internal focus on high margin machines

Costs • New management team stronger focus on costs • Pro-active management of manufacturing processes

Staff • Investing technical expertise to support product development • Investing in business development; additional support for

distributors, client training

Results built on getting the basics right

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Service contracts Background: • Trophon EPR requires annual service • Major service after 5,000 probes disinfected • Rate of major service dependant on practice mix

Solution: • Introduction of service contracts • 80% acceptance in New Zealand • Introduce to other markets during 2012 • Objective: > 10% of product sales revenues

Service contracts add to creation of strong annualised revenues

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Production – key to meeting growth objectives

Production • Increased by approximately 50% • Focus on manufacturing processes • Economies of scale starting to add to margins • Better supplier contracts • Identify third party high volume medical device

manufacturers to outsource when appropriate

NanoNebulant • Outsource cartridge production • Research and development in-house • Patent protection for nebulant • 3 manufacturers in Europe, Australia and USA • Reduces capital investment • Shortens shipping times for European and USA markets

Other consumables • Research and development in-house • Partner with appropriate third party manufacturers

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Investing in sales support

Europe • New look at distribution methodology • Hamburg office – operational • Increase dedicated resources to facilitate growth

USA • Indianapolis office - alongside GE Healthcare service operations and Applied Laboratories Inc maker of NanoNebulant for USA and Canada

• Additional resources to support GE Healthcare

Asia • Build on Hong Kong Hospital Authority approval

Australia • Steadily building installed base • Introduction of service contracts

New Zealand • Impressive launch • High percentage immediate conversion after initial trial • 80% acceptance of service contracts

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Company background

Established: Incorporated 2001 Listed Australian Stock Exchange 2007

Offices Head office: Sydney USA: Indianapolis Germany: Hamburg

No of employees 80

Manufacturing capacity 6,000 units per annum

Product registrations Australia: TGA Feb 2009 USA FDA Feb 2011 Canada: Health Canada Sep 2008 New Zealand: MEDSAFE Nov 2008 Europe CE Mark Apr 2008 Germany TÜV Rheinland Nov 2006

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